Your 2023 Guide to Bidding Wars
Just the term “bidding war” conjures up images of cut throat buyers clawing their way to the top of the offer list to secure that perfect house. It’s stressful! With historically low inventory, bidding wars are still happening. More often than not, buyers do not know what the competing offers are - they are going in blind and hoping for the best. I always advise my clients to dig deep and find their comfort level in how high they want to go. I ask them, “figure out the amount you are willing to pay where you won’t kick yourself if you do get the house, and you won’t kick yourself if you don’t.” Here are some tips to consider to position your offer as best as possible, or avoid the wars altogether.
Get pre-approved or fully underwritten - Are you using a mortgage to purchase the house? Get a pre-approval letter instead of a pre-qual letter, or better yet, get fully underwritten. What’s the difference? A pre-qual letter is the first step in obtaining a mortgage and it gives you an idea of how large a loan you in which you will qualify, but is only based on what you tell the bank. A pre-approval letter is a conditional commitment to actually grant you the mortgage. It involves completing a mortgage application and supplying the bank with the documents to give them a better picture of your financials and the loan amount you actually qualify for. Want to stand out even more? Get fully underwritten. It is a step further than than a pre-approval and means an underwriter has already approved your file. Pre-approval or fully underwritten speeds up the buying process and could give you an edge.
View the property in the flesh - When a seller is considering multiple offers, typically more weight will be given to buyers who have seen the home in person. Video tours are great, but they do not reveal everything. Things like the drive/surroundings leading to the house, that water leak on the ceiling, or a pesky neighbor are things that might not reveal themselves in a video tour.
Contingencies, contingencies - The highest bid is not always the winning bid. An offer with a laundry list of contingencies typically will not be a contender in a multiple offer scenario. Of course as a buyer you want some rights and the ability to do your due diligence! A home inspection is a reasonable ask, but if you have a contractor friend you can bring to the viewing and look at the condition of the home, maybe you’d then feel comfortable waiving the inspection. Just remember the seller is holding the cards and your simple ask for the seller to pump the septic tank before closing might bump you off the contenders list.
Choose your Realtor wisely - When buying a home you want an agent that knows the market and the ins and outs of the area. A good buyer’s agent knows what homes are selling for in multiple offer scenarios, how to set your expectations and guide you to position your offer terms in the best possible light.
Appraisal Floor - If you are making an offer over ask and using a mortgage, the home appraisal should be on your mind. If you offer 100K over list price, but the appraisal values the home at list, then you have a gap between what the bank is willing to loan and what you want to pay. Speak to your lender early in the game to see what your options might be in this scenario. Often you may have to make up the difference between the appraisal and your offer in cash out of your own pocket and if you are wiling to do this, it should be communicated with your offer.
Consider renovating - Everyone wants the cute house that is totally turn-key, but those are also the houses with multiple offers often selling for 50-100K over ask. A savvy buyer may consider a property that needs some cosmetic work but has good bones and consider putting 10-20K into it, maybe even get it for under list and avoid the competitive listings.
Don’t get discouraged! It may take a couple tries before you secure that dream home.
